Trading is different from investing, usually focused on more short-term movements in markets. Learn the essentials you'll need to know to be a successful trader.

Frequently Asked Questions

  • What is a stock?

    A stock is a security that represents the ownership of a part of a company; it is also commonly referred to as a share, or equity, in the company. Stocks can be⭕ bought and sold on the open market via stock exchanges, and those transactions are governed by various regulatio🐼ns meant to protect the investing public.

  • What is Volume-Weighted Average Price (VWAP)?

    Also known as the VWAP, the Volume-Weighted Average Price is a trading benchmark that is used by traders to see the average 🏅price that a security has tradedಞ through the day, in both volume and prices of trades.

  • What is a limit order?

    A limit order is a kind of order that an investor makes when he or she wants to buy or sell a stock at a specific price. The two types of such orders are a buy limit order, whereby the order will be placed at the limit price or lower, and theౠ sell limit order, where the order will be executed at the limit price or higher.

  • What is the risk/reward ratio?

    The risk/reward ratio is used by investors to measure the prospects of reward for their investments over the potential risk of losing that capital. The ratio helps assess the expected r♋eturn and risk of a given trade.

Key Terms

Actor Christian Bale accepts Best Actor in a Comedy award for 'The Big Short' onstage during the 21st Annual Critics' Choice Awards at Barker Hangar on January 17, 2016 in Santa Monica, California.
The Fina🥀ncial Mavericks: Discover the Stories Behind the World’s Most Renowned Traders
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Framing Effect: What It Is and Examples
Oil rig
Oil Gains as OPEC Holds Steady on Output Increase🍨s
Young lady using a banking app on her phone
Robinhood vs. eToro
Volume Weighted Average Price
Volume-Weighted Averag🙈e Price (VWAP): Definition and Calculatio🌼n
A row of traders at trading desks in a brokerage use computer systems with multiple screens to enter orders for clients.
Trading Desk: Definition, What It Does, Common ꧟Types
Rule of Thumb: Definition and Financial Examples
An unhappy shareholder sits at a conference table with their attorney and talks to a company representative as a secretary takes notes.
What Is a Shareholders' Agreement? Included Sections and Example
What ♓Is a Bid-Ask Spr🉐ead, and How Does It Work in Trading?
graphs and charts on a screen
Whipsaw: Definition, What Happen🐷s to Stock 🐟Price, and Example
Hand drawing abstract business chart
Open Position: Meaning and Risk in Trading
Mainten🐠ance Margin: Definition and Comparison to Margin Accounts
Decline: What It Is, How It Works, Example
Money Management: The processes utilized to record and administer an individual’s, household’s, or organization’s finances.
Money Management: Definition and Top♋ Money Managers by🌠 Assets
Fu♑nds Management: Definition, Respon𒁏sibilities, and Industries
a digital line graph
Absolute Return and Relative Return: What's the Difference?
Bidder: What it Means, How it Works, Types
Businessmen are analyzing the investment.
Retroces꧃sion: Definition, Types, Example, Criticisms
Hands of woman writing in a note pad on a desk with an open laptop and cup also on the desk.
Crafting a Winning Investing Exit St⭕rategy: Essent𝄹ial Tips for Savvy Investors
Portfolio Margin: Overview, How it Works
close up of man hand analyzing stock market chart
What Is a Fill? Definition in Investing, How It Work🌟s, and Types
Midsection Businessmen Analyzing Charts On Laptop In Office
Futures Prices Converge Upon Spot Prices
Woman Checking Stocks and Shares Data With Smartphone in City
Batting Average: What it is, How it Works
Futures Trading
Are Micro E-Mini Futures 'The Next Big Thing'?
Ultimate Trading Guide
Ultimate Trading Guide: Options,♌ Futures, and Technical Analysis
A woman wearing glasses holds a smartphone, and the screen of the phone is pointed to her face but is reflected in her glasses. It displays stock chart data.
Commodity Spot Prices vs. Futures Prices: What's the Difference?
A close-up of businessman working in office.
How t🔯o Calඣculate the Notional Value of a Futures Contract
What Is a Trader, and What Do Traders Do?
What Is a Trader, and What Do Traders Do?
Signatory
Endorse🌄r: What They are, What They do, Best Practices
Offer to Buy An Asset: Types and Examples
Two people point to stock portfolio information on a tablet.
How To Reduce Risk With Optimal Position Size
Selfish Friends
Self-Serving Bias: Definition and Examples
People Pointing
Attribution Bias: What It Is 𒁃and W𓆉hy It Is Important in Finance
Close-up of a Wristwatch
5 Ways to Avoid Present Bias in Inves🦋tment Decisions
Buying Power (Excess Equity): Defi﷽nition in Trading and Example
Illiquid Assets: Overview, Risk and Examples
Investor: A person or entity who commits capital with the expectation of financial returns.
What Does an Inves🌞tor Do? What A▨re the Different Types?
Liquidity
Understanding Liquidity and How to Measure It
Notional Value
Understanding Notional Value and How It Works
Speculation: Conducting a financial transaction that could yield a significant gain or loss.
Speculation: Trading W🐷ith𒀰 High Risks, High Potential Rewards
Trading in the Pre- and Post-Market Sessions
A salesperson in a produce warehouse stands near crates of fresh avocados and uses a tablet to check the current market price.
Spot Rate: What It Is, How It Works, Example
Spot Market
Spot Marওket: Definition, How They Work, and Example
Know Your Shareholder Rights
Two colleagues discuss charts on their computers at a work table
Average Daily Trading Vo🌱lume (ADTV): Definition🍸, How To Use It
Breakeven Point
Breakeven Point: Definition,🉐 Eꦏxamples, and How To Calculate
Clearing
What Is Clearing? Definition, 🎶How It Works, ✤and Example
Proprietary Trading: A financial firm or bank that invests for direct market gain rather than earning commissions and fees by trading on the behalf of clients.
Proprietary Trading: Wha♕t It Is, How It Works, Benefits
looking up at the skyscrapers in london's financial district
What Is an Activist🐻 Shareholder? What They Do and How They Work
Short Covering: Buying back borrowed securities in order to close out an open short position.
Short Covering: Definition, Me☂aning, How It Works, and Example🎃s
A person looks down while working in front of a computer screen displaying stock data at the New York Stock Exchange
Tജick Size: Definition in Trading, Requir𒉰ements, and Examples
The reflection of an derivative investor appears on a computer monitor showing the price movement of the underlying stocks they are following.
Underlying Asset (Derivatives)—Definition, How It Work🀅s, Examples
woman at desktop looking at financial charts
Drawdown in Banking vs. Drawdown in Trading: What's the difference?
Cross Trade
What Is Delive๊red Ex Ship (DES), and How Is It Diffe✤rent From DAT and DAP?
Slippage
Slippage: What It Means in Finance, With Examples
Close Position: Definition, Ho🦋w It Works in Trading, and Example
An engineer stands on a rooftop of a highrise building as they look at a telecommunication tower and estimating the cost to replace it.
Sinking Fund Method: Definition, How It🗹 Works, and ꧙Advantages
Business person pointing to finance business chart and data
Upside: Risk/Reward Definition and Examples
A stock trader on the floor of the stock exchange signaling a trade based on current stock prices.
Trade Signal